Why Is My Tax Refund Lower Than Expected?

Nothing is refunded to you unless more was withheld during the year than the assessment ends up requiring. The notice of assessment sets out both sides: the tax you owe on your taxable income, the credit for tax already paid during the income year, any excess private health reduction or refund, and the resulting refund or bill.

Two people on the same salary can land on very different outcomes because withholding is calculated payment by payment on assumptions — a full year at that rate, one payer claiming the $18,200 tax-free threshold, no study loan, no surcharge. The assessment tests every one of those assumptions once, at the end.

Comparing an estimate with the notice one line at a time finds the cause faster than re-running the estimate. The first line that differs is almost always the explanation.

• Taxable income — assessable income less deductions. A single missing deduction or an extra income record moves everything below it.
• Tax on taxable income, before offsets and before the 2% Medicare levy.
• Medicare levy, and the Medicare levy surcharge if you were without an appropriate level of private patient hospital cover.
• Compulsory study or training support loan repayment.
• Tax offsets, which reduce tax payable and are mostly not refundable in cash.
• PAYG credits — the total actually withheld and reported by your payers, which may not match your own tally.
• The account outcome, which is where a credit can be applied against a debt before anything reaches your bank.

The ATO describes this as not enough tax being withheld from your income across the income year to meet your obligations. It has several shapes: moving into a higher tax bracket through a promotion or a pay rise, holding more than one job at the same time, or claiming the $18,200 tax-free threshold from more than one payer.

Each payer withholds as if it were your only source of income. Where you expect to earn more than the tax-free threshold in total, only one payer — normally the highest-paying one — should be claiming the threshold, and the others should withhold at the no tax-free threshold rate. Government allowances and payments are also assessable and are frequently paid with little or no tax withheld.

Changing jobs mid-year is a common trap. You can claim the threshold from the new payer even though you claimed it from the previous one, but if the two overlap at all, withholding across the year is short and the assessment collects the difference.

From 2025-26 compulsory repayments on HELP, VSL, SFSS, SSL, ABSTUDY SSL and AASL debts are worked out on marginal rates: the repayment applies only to income above the minimum threshold rather than as one rate across your whole income. If you last checked when a single flat rate applied to the full amount, your expectation is out of date.

• Repayment income is not your salary. It is taxable income plus reportable fringe benefits, total net investment loss (including net rental losses), reportable super contributions and exempt foreign employment income — so salary sacrifice and a negatively geared property push it up, not down.
• If you never told your employer about the loan, nothing was withheld towards it all year and the full repayment lands on the assessment.
• A pay rise, a bonus or a second job can lift repayment income past a band boundary after your withholding was already set.
• Where you hold more than one loan type, the compulsory repayment is applied in a set order — HELP first, then VSL, SFSS, SSL, ABSTUDY SSL and AASL.

The Medicare levy is 2% of taxable income for most residents, with reductions and exemptions at low income levels. The Medicare levy surcharge is separate: it applies where you did not hold an appropriate level of private patient hospital cover and your income for surcharge purposes is above the threshold.

Income for surcharge purposes is broader than taxable income — it adds reportable fringe benefits, total net investment losses and reportable super contributions, and for couples it is combined income. A salary comfortably under the threshold is not, by itself, a reason to expect no surcharge. Cover held for only part of the year produces a surcharge for the uncovered days.

• The family threshold increases by $1,500 for each dependent child after the first.
• The surcharge is calculated on taxable income plus reportable fringe benefits, so it can be a four-figure amount that no payer withheld anything against.

The first item on the ATO list of reasons for a tax bill is a tax offset that is no longer available, or that you are no longer eligible for — and the example it gives is the low and middle income tax offset, which ended on 30 June 2022. Refunds that felt normal in 2021 and 2022 included an offset that has not existed since.

The low income tax offset still applies. It is worth up to $700 at $37,500 of taxable income or less, falls by 5c for each $1 above $37,500 and by 1.5c for each $1 above $45,000, and cuts out entirely at $66,667. It appears on the notice of assessment under non-refundable tax offsets: it can reduce tax payable to nil but is never paid out as cash, so an unused amount cannot become a refund.

Several amounts are estimated during the year by someone else and squared up on the assessment.

• The private health insurance rebate is income tested. Claiming a higher rebate tier through reduced premiums than your income entitled you to produces an excess private health reduction on the notice of assessment.
• Exceeding your concessional (before-tax) super contributions cap can produce extra tax on the assessment. Unused cap amounts carried forward from up to 5 previous years are applied automatically first, so a bill only appears if the excess survives them.
• The ATO compares your return against pre-fill and data-matching information. Where they differ, it may ask for a reason, amend the return where it has high confidence in the data, or contact you.
• A deduction disallowed on review reduces the refund directly, and the adjustment explanation on the assessment says which one.

A calculated refund is a credit on your account, not a payment instruction. The ATO balances the result of the return against your accounts with it and with other Australian Government agencies before paying anything out, which is what the "balancing account" status describes.

Credits can be applied to an existing tax debt, to a debt that was previously placed on hold and has been re-raised, and to debts with other agencies including Services Australia, Centrelink and Child Support. Where the ATO is required to pay part or all of a refund to another agency, it notifies you.

When your account balance ends up different from the assessment outcome — because of an offset, a penalty, general interest charge, credit interest, or lodging several years on the same day — the ATO issues a statement of account with the notice of assessment. Your account transaction history shows exactly where the money went.

Estimates are built from salary and deductions. Assessments include everything.

• A capital gains tax event — selling property, shares or crypto assets — adds a net capital gain to taxable income with no withholding behind it.
• Investment income such as dividends and rent, and distributions from partnerships or trusts.
• Sharing economy income from ride-sourcing, renting out assets or providing personal services.
• Sole trader income where PAYG instalments through the year did not cover the final liability.

Separate the two possibilities before acting: the assessment used wrong facts, or it used the right facts and the estimate was optimistic. Only the first is worth amending.

1. Open the notice of assessment and compare it against your own figures line by line.
2. Check the account transaction history for a credit applied to a debt, and read any statement of account issued with the assessment.
3. If the ATO used incorrect or incomplete information, gather the substantiation and request an amendment for that income year.
4. If you disagree with the law or with the facts the ATO relied on, lodge an objection rather than an amendment.
5. To change next year: ask a payer to increase withholding, tell your employer about your study or training loan, consider voluntary entry into PAYG instalments for business or investment income, or make tax prepayments.

Frequently asked questions